Denationalise Tamiflu Immediately!

The title is really an ironic (if somewhat affectionate) reference to this post from Brad DeLong. Reading the news this morning, it seems that Tamiflu may not be such an unambiguously good thing as it was being made out to be:

Roche, the Swiss pharmaceutical group, on Thursday moved to reassure investors after US regulators said they would on Friday examine reports of up to 12 deaths and 75 cases of children who suffered health problems after using Tamiflu, the company’s anti-flu drug.

The US Food and Drug Administration said it was in “active communication” with regulators in Japan, the country with the widest use of Tamiflu for regular seasonal flu treatment, and where all the deaths and most of the other incidents of side-effects occurred.

I think a number of points could be made here. Firstly in this game there will be no free lunches. There are risks one way and there will be risks the other. Individuals may have to take decisions based on the best available information. Secondly, at the end of the day Tamiflu is not going to be virus-specific for any possible variant of avian flu simply because we don’t yet know the variant, so forward planning and risk assessment is inherently a complicated business here.

Lastly, when Brad said this: ” Low-probability but high-payoff projects are likely to be underfunded by the government–but properly funded by private companies willing to roll the dice. However, these ex ante considerations vanish ex post when an epidemic threatens…”, ( maybe I would say better rather than properly, but that’s a detail) – he was both right and wrong, IMHO, since the real issue which lies behind the argument is the moral hazard one. If you let the market regulate drug development, but then when you have a drug which is a big winner you immediately take it over, it isn’t clear that the market will work as well as you want it to next time round. On the other hand, governments can’t just stand back in the face of a real and present danger to their citizens. So I guess the only answer is negotiation and consensus, and maybe this consensus would include compensating those companies who are given the green light to go ‘full speed ahead’ if it turns out that – post ante – that decision was a bad one.

All in all a complex situation where prudence is indicated.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

1 thought on “Denationalise Tamiflu Immediately!

  1. From Dean Baker:

    The $220 billion question (current U.S. spending on prescription drugs) is where are the economists? Remember, economists are people that get high blood pressure from 10 percent tariffs on shoes or pants. When Bush put a temporary tariff on steel imports that maxed out at 30 percent, economists all over the country became apoplectic. So why is the economics profession overwhelmingly silent about drug patents, which are the equivalent of tariffs of 300 percent on average, and affect a product that is much more important to our economy and our health?”

    There is no free market when government granted monopolies exists (drug patents here), “market based solution” is just hypocrisy since it’s an all government thing! The government created the problem with patents, so some will say it is easy to solve for the goverment: let the really free market work and get rid of patents…


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